Editor’s
note: Nora Kenan has been an intern at the Asser Institute for the past five
months and is about to complete her LL.B. in International & European Law
at The Hague University of Applied Sciences. Upon graduating, she will proceed
with a Master’s in human rights at the University of Utrecht.
The Norwegian
Transparency Act [1](‘Åpenhetsloven’), also
known as the ‘Act on Business Transparency and Work with Fundamental Human Rights
and Decent Work’ was proposed in April 2021. Now, two months later, the Act has
officially been adopted by the Norwegian government
and represents yet another mandatory due diligence initiative which has been
trending across various jurisdiction in the recent years. The Act will require all
large and medium-size corporations in Norway to disclose the measures taken to
ensure the respect for human rights throughout their entire supply chain.
Various
Norwegian organizations have been campaigning for years in favor of such a law.
The official preparations began in 2017, when the Parliament (‘Regjeringen’)
requested the Government (‘Stortinget’) to explore the possibility of
introducing a law that would oblige companies to inform consumers about the
steps that they take to follow up on various human rights responsibilities. The
Government appointed a law firm as well as a group
of experts, the Ethics Information Committee, to
conduct thorough research on the matter, and to investigate whether there were
any other legal obligations standing in the way of a proposal of this kind,
such as for example EEA-obligations or bilateral/multilateral agreements. As a
result of this research, it was concluded that there was indeed room for
imposing human rights obligations on corporations. Shortly after, the Ethics
Information Committee published a report
in which they proposed the introduction of a due diligence legislation – more
specifically, the Transparency
Act. The Act consists of fifteen paragraphs (§)[2], and each paragraph has a
commentary which further describes how it should be interpreted and applied.[3]
The
objective of the law is essentially to promote corporate respect of human
rights and decent working conditions in the production of goods and provision
of services, as well as to ensure public access to information on the steps
taken by corporations to safeguard these goals (§1). By making this information
public, individuals and stakeholders in general are given the chance to
directly question the activities of a company.
Key
elements
The Act is
based on various global standards related to human rights and business, such as
the OECD Guidelines for Multinational Enterprises and the United Nations
Guiding Principles on Business and Human Rights (UNGPs) – similar to other
mandatory due diligence initiatives. However, this Act introduces a rather
unique approach to transparency and regulatory oversight, namely the Right to Information
and the Duty to Disclose. In its essence, the Act covers all the elements of human
rights due diligence (HRDD), such as detecting the negative impacts of
corporate activity on human rights, continuously assess and take action to
mitigate these negative impacts, as well as to report about their efforts. Even
though many human – and workers’ rights conventions are listed throughout the
Act, such as the International Covenant on Economic, Social and Cultural Rights
(ICCPR) and ILO Declaration on Fundamental Rights and Principles at Work, the
commentaries emphasize that these are non-exhaustive examples and accordingly refers
to, inter alia, the UN Convention on the Rights of the Child and the ILO
Indigenous and Tribal Peoples Convention.[4] The Act uses these conventions to clarify what
is meant by ‘decent working conditions’, adding that ‘decent working
conditions’ entails the protection fundamental human rights as according to
these conventions, as well as safe and secure working conditions and an income
that is sufficient for the workers to support themselves and their families (§3(c)).
Personal
scope of application
The Act is
applicable to all larger companies domiciled in Norway, regardless of whether
they offer their products or services within the Norwegian borders. Further,
foreign corporations who sell their products or services in Norway and who have
tax obligations to the Norwegian government also fall within the scope of this
Act (§2). In order to define a ‘large company’, the Act makes a reference to §1-5
of the Norwegian
Accounting Act.[5] Alternatively, a
corporation is also considered a ‘large company’ if it meets at least two of
the following three requirements:
1.
Turnover of at least 70 million NOK (approximately, €6.880.000 (June 2021))
2.
Balance-sheet total of at least 30 million NOK (approximately, €2.950.000 (June
2021))
3.
Average amount of employees in a financial year: 50 man-years (§3(a)).
The
Ministry’s own calculations stipulates that this will entail approximately 8800
companies. To give an insight to the comprehensiveness of this scope, the French
duty of vigilance law applies to 200-300 corporations.
Scope
of due diligence obligation
The Act
imposes an obligation for companies to carry out due diligence assessments in
accordance with the OECD Guidelines for Multinational Enterprises with the aim
of documenting what actions they take to prevent and limit human rights risks. Essentially,
such a due diligence process entails (i) the embedment of responsible business
conduct into the company’s policies and management systems; (ii) mapping the actual
and potential negative impacts on human rights and decent working conditions
that the company has either caused or contributed to, or which are directly linked
to their corporate activities; (iii) implementation appropriate measures to
stop, prevent or limit negative impacts; (iv) monitoring of the implementation
and results; (v) communication with the affected stakeholders about how
negative impacts are dealt with; and (vi) arranging for or cooperate on remedy and
compensation where this is required. The due diligence assessments should be
proportionate to the size and nature of the company, and to the context in
which the company operates (§4).
Right
to information
As the
wording of the Act reveals, the element of transparency lies at the core of
this Act and is embodied in an explicitly recognized Right to Information (§6).
This paragraph establishes the right, upon a written request, to receive
information from a corporation on how they tackle actual and potential negative
consequences of their corporate activities, be it with regards to general or
specific information (§6). However, the Act establishes some exceptions in the
form of grounds upon which a request for information may be rejected, such as
for example if the request seems obviously unreasonable, or if it concerns
commercially privileged information. Despite these exceptions, the provision
remains strong in nature as it sets clear guidelines on how requests should be
dealt with, and that it should, generally speaking, be handled within 3 weeks (§7).
Furthermore, rejections can be appealed, and fines may be issued in case of
repeated infringements by the company, meaning unreasonable denials of
requests.
Duty to disclose
Hand in
hand with the right to information is the duty to disclose. The Act creates a duty
for corporations to disclose their due diligence processes, which must be made available
and accessible on the website of the corporation and include, at the minimum: a
general description of due diligence policies and routines for handling risks
to human rights and decent work, information on the negative impacts identified
by the company, as well as information on measures taken to cease or prevent
these negative impacts and the expected results (§5). Besides disclosing information
on its website and responding to requests for information, corporations must also
disclose all information necessary for the Norwegian Consumer Authority (‘Forbrukertilsynet’)
and the Market Council (‘Marketsrådet’) to carry out their duties (§10). The
company must respect the set deadlines and provide the information orally or in
writing, depending on the request. As for the requests coming from either one
of these two parties, matters of corporate confidentiality are, generally
speaking, to be disregarded.
Enforcement and sanctions
The
Norwegian Consumer Authority will be responsible for implementing and enforcing
the law. They shall, on their own initiative or the upon inquiries from others,
seek to influence corporations to comply with the law (§9). Anyone can bring a
complaint with the Norwegian Consumer Authority through their website. In case
of a complaint, the Norwegian Consumer Authority will forward it to the Market
Council who will deal with the claim. If it is found that the corporation has
not sufficiently complied with the law, the Norwegian Consumer Authority
together with the Market Council may issue injunctions for non-compliance with
due diligence obligations or the right to information, fines for non-compliance
with the duty to disclose and for repetitive breach of due diligence
obligations or the right to information (§11-14). The Act does not give the
victims of human rights abuses a right to seek remedy in court. Further, it
does not provide for civil liability for harm caused, which fails to live up
the recent legislative and judicial developments in other HRDD initiatives.
Conclusion
Inspired by
John Ruggie’s Protect, Respect and Remedy Framework and the United Nations
Guiding Principles on Business and Human Rights, the Norwegian Transparency Act
introduces a duty for corporations to respect human rights, which is a
far-reaching step in the right direction. The adoption of a HRDD act is in itself
a historical happening. This Act primarily
focuses on the element of transparency and regulatory oversight enshrined in
the Right to Information and the Duty to Disclose. Additionally, the Act is not
limited to a corporation and its subsidiaries but covers its entire supply
chain.
That being
said, there is, according
to one of the member of the Ethics Information Committee,
still room for improvement. First of all, the Act does not cover any
environmental impacts. However, the Environment Information Act of 2003 also contains
some of the elements that are present in the Transparency Act, such as the
Right to Information. Yet, this might emerge as a point for improvement at a
later stage. Other points of improvement relate to access to justice for
victims of corporate abuses. Since the Act is focused on consumer rights, it could
also be appropriate for it to include a right for individuals to bring a case
against a corporation in a court. Lastly, the fact that not all corporations
fall within the scope of this Act can also be a point of criticism. Arguably, the
size of the company is not what determines whether or not they take part in human
rights breaches throughout their supply chain. Nevertheless, the Act in
its entirety constitutes a remarkable milestone which forms part of the ongoing
HRDD legislative wave across various European countries.